Fernando Broner (CREI) speaks at the ESM

"Fiscal Multipliers and Foreign Holdings of Public Debt"

This paper explores a natural connection between fiscal multipliers and foreign holdings of public debt. Although fiscal expansions can raise domestic economic activity through various channels, they can also have crowding-out effects if the resources used to acquire public debt reduce domestic consumption and investment. Thus, these crowding-out effects are likely to be weaker when public debt is purchased by foreigners. We test this hypothesis on (i) post-war US data and (ii) data for a panel of 17 advanced economies from the 1980's to the present. To do so, we assemble a novel database of public debt holdings by domestic and foreign creditors for a large set of advanced economies. We combine this data with standard measures of fiscal policy shocks and show that, indeed, the size of fiscal multipliers is increasing in the share of public debt held by foreigners.
 

Fernando Broner is a Senior Researcher at CREI and a Barcelona GSE Research Professor. He is one of the directors of the Master in International Trade, Finance and Development at the Barcelona GSE and teaches in the PhD program of UPF. He is a Research Fellow at the CEPR and a Co-Editor at the Journal of International Economics. He received his PhD in Economics at MIT in 2000. He has been Visiting Professor at MIT, Assistant Professor at the University of Maryland, Advisor at the Bank of Spain’s Division of International Economics, and Visiting Scholar at the IMF and World Bank. He was awarded a European Research Council Starting Grant in 2010 for the project, “International Capital Flows and Emerging Markets.” His research interests include International Economics, Finance, and Macroeconomics.

This is an ESM research internal seminar. If you would like to attend, please write an email to ESMresearch@esm.europa.eu